Last week, S&P Global affirmed its long-term rating of Dunedin City Council and its financing arm Dunedin City Treasury Ltd at AA-, after they both were downgraded from AA in March.
The outlook for both organisations remained negative.
Dunedin Mayor Sophie Barker said the static rating was good result during tough times for the local government sector.
"Keeping our credit rating unchanged means we won’t face the kind of additional pressures on our budgets that a downgrade would have delivered, which is obviously pleasing," Ms Barker said.
Sector challenges, such as government-proposed rates cap reform, were ongoing, and work to control costs needed to continue while keeping up community investment, she said.
Cr Andrew Simms said, given uncertainty on the council’s future income and role, maintaining its "relatively strong" credit rating was good news.
"Many expected that a credit downgrade and potentially a rise in our interest costs, would follow, so it’s especially pleasing that Dunedin’s rating has been maintained."
In its report, S&P Global said council fiscal outcomes were expected to improve in the next three years, supported by increased rates revenue and an improved operating performance by Aurora Energy.
"Proposed caps on council rates increases ... could constrain the council’s ability to increase revenue and meet our forecasts.
"This could also lead to debt growing and liquidity weakening beyond our expectations if the council doesn’t reprioritise its spending."
The negative outlook reflected its view budgetary outcomes could underperform expectations.
Cr Lee Vandervis said any further rating reduction would expose the council to a large interest rate increase.
Capped rates and "unsustainable" council debt increases would require a new approach — he expected significant spending and staff cuts next year and into 2027 to comply with government direction.
In contrast, Cr Benedict Ong said there was opportunity to grow council jobs in future.
Last month, New Zealand received a credit rating of AAA, which underpinned Dunedin’s own high-grade rating, he said.
"The recent affirmation of New Zealand Crown as a global beacon of financial strength will enable us at Dunedin local government to grow our city and council jobs and our economy."
Cr Russell Lund said while the unchanged ratings were good news, it was "inevitable" they would drop if council revenue declined without equivalent spending reduction, he said.
Cr Mandy Mayhem said evidence of fiscal improvement was needed before the credit ratings changed.
Council chief financial officer Carolyn Allan said the result reflected its improved financial performance in the past year and S&P Global’s expectation they would continue.
"Given the pressures facing the entire local government sector, and the government’s recently announced rates capping plan, this is a good outcome for the council."
